LightSquared, Harbinger Capital, Philip Falcone Under Fire

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Posted 27 Dec, 2011

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The LightSquared project has taken what seems to be twin hits with the leak of a report suggesting that its service will destabilize the GPS industry and the legal troubles of its founder, hedge fund manager Philip Falcone.

LightSquared is an ambitious but troubled LTE service that leased capacity to carriers and big businesses. It already has a number of these companies on board. The obstacle is that the technology it uses can interfere with GPS operations. The back and forth during the past few months has been on whether LightSquared can come up with an approach that serves its customers' needs without rerouting GPS users into the nearest river or otherwise destabilizing their service.

The answer may be that LightSquared's approach just doesn't work. A report on a test done by the National Telecommunications & Information Administration (NTIA), part of the Commerce Department, says that as many as 75 percent of GPS devices may be interfered with. The conclusions were leaked to Bloomberg:

The results from testing conducted Oct. 31 to Nov. 4 show that "millions of fielded GPS units are not compatible" with the planned nationwide wholesale service, according to the draft seen by Bloomberg News.

The LightSquared spin machine immediately went into damage control mode. CEO Sanjiv Ahuja slammed the tests, the interpretation of the results and the agenda of the leakers. Here is a representative quote from Ahuja in The Hill:

Based on Bloomberg News' reporting, it is apparent that this leak was intended to damage LightSquared's reputation, spread false information in the marketplace, and prejudice public opinion against LightSquared.

He wasn't the only angry LightSquared executive. The company released a statement from Martin Harriman, the company's executive vice president of Ecosystem Development and Satellite Business:

The statement that testing shows that most GPS devices would be disrupted by LightSquared's operation is patently false. There is no way that such a conclusion could be drawn without deliberately ignoring a critical element in LightSquared's mitigation proposal to manage the power from its network that GPS devices will be able to receive. By ignoring this commitment by LightSquared, this conclusion is erroneously based on estimated power levels that are up to 15 times the levels guaranteed by LightSquared. It is important for the public to understand the purposeful manipulation at hand here: The NTIA, not the leakers of this raw data, will make the final determination about how many devices passed or failed. And that assessment has not yet been made.

It is interesting to note that Ahuja is quoted in The Hill piece as saying "the testing assumed LightSquared will operate its network at power levels 32 times greater than it really will," while Harriman's statement suggests the exaggeration only is up to 15 times greater.

It remains to be seen, of course, if Harriman's and Ahuja's outrage is justified. That only will come when the final report is released and experts have the opportunity to assess the methodology and results.

On Friday, Republican Sen. Chuck Grassley of Iowa said the disclosure of the SEC's Wells Notice underscores the need for more information about relationships between LightSquared and telecom regulators. A representative for Harbinger didn't immediately respond to a request for comment.

At least there is something here that Falcone can find amusing. If Harbinger indeed does have inappropriate relationships with regulators, they certainly don't seem to be paying off.

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